Sunday, March 31, 2013

On Friday, U.S. District Judge Naomi Reice Buchwald in Manhattan ruled for the banks, gutting lawsuits about LIBOR manipulation. Judge Buchwald’s nickname is “Buckwild” and she is very much part of the New York crowd. So what part about the court in New York being the most corrupt do people fail to understand? It is the only court that claims it can change the words of witnesses in the transcripts to sanitize the record AFTER the fact, something anyone else would get 5 years in jail for (see UNITED STATES v. ZICHETTELLO @p97). No suit against ANY major NY bank will EVERproceed in that court – Southern District of New York. Every major suit ever filed in the SDNY since 1985 has been largely dismissed. Just look at all the suits dismissed evenAFTERthe investment banks plead guilty to the SEC for putting out fake research.

Here there were 16 banks that had faced claims totaling billions of dollars in the case, which had been considered the biggest legal threat in recent years. As far as investigations being pursued by regulators in the United States, Europe and Britain, those will always be non-events. ANY New York Law Firm that brings this type of suit we have to ask WHY when none ever succeed? Clients pay them millions up-front to do a job that never works?

Perhaps, these suits are brought in NYC knowing they will be dismissed and that is the way the banks remain UNTOUCHABLE no matter what they do. Perhaps the law firms are part of the protection for the banks. If they really wanted to win, they should have brought the lawsuits in London where LIBOR is set – why New York? This time the banks included Bank of America Corp, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co, Royal Bank of Canada, Royal Bank of Scotland and WestLB AG. Since NY dismisses the lawsuits, it is then impossible to bring them in the US again.

The banks were accused by a diverse body of private plaintiffs, ranging from bondholders to the city of Baltimore, of conspiring to manipulate the London Interbank Offered Rate (Libor), a key benchmark at the heart of more than US$550 trillion (S$682 trillion) in financial products. How can these banks pay fines, manipulate constantly, and always walk away? Something is just not right about this whole thing. NEVER sue the banks in New York. That is their home turf. The Facebook suits were consolidated and usurped from around the country and sent where – NYC. That is the court that handled M.F. Global. Come on. The definition of insanity is constantly doing the same thing over and over, while expecting a different result. Congress will not reform the banks, nor the Judiciary. So the whole thing is one giant waste of time.

Everything the Fed does ultimately leads to less economic activity, less savings and more debt resulting in poverty for Americans, not prosperity. Debt is not prosperity. Debt is poverty and economic slavery.

From a European perspective, the list of broken taboos and assumptions continues to grow. The euro’s core founding principles, based on the Maastricht Treaty’s “irrevocable” fixing of currency rates, and of the free movement of capital, have been violated. The euro will never be the same again; its preservation now depends urgently upon economic recovery. Without the delivery of economic growth, unemployment will rise to yet higher post-war record levels, and the widespread and growing disillusionment felt by EU citizens towards their economic regime will threaten to spill over into more explicit questioning of the euro’s suitability.

Total US Currency in circulation (i.e., all US Dollars out there): $1,102 billion (source)Total Deposits in US Commercial Banks: $9,294 billion (source)

Which means that if (and we are not saying it will) a Cyprus-style fiasco were to occur in the US, and those $9.3 trillion in total deposits seek to obtain"physical representation" in the form of actual currency (i.e., a systemic bank run), just as all those lining up in front of Cypriot ATMs are desperate to do each and every day when they have a €300 limit on physical cash withdrawals, there will be a roughly 88% haircut for every single dollar that US savers believe is "safe" in the bank.

A day after former Cypriot President Vassilou was found to be among many elite Cypriot (politicians and businessmen) who had loans written-off by the major (now insolvent) banks; it appears the rot is far fouler than expected. In a somewhat stunning (or purely coincidental) revelation, ENETEnglish reports that Cypriot newspaper Haravgi claims that current President Nicos Anastasiades' family businesses transferred 'dozens of millions' from their Laiki Bank accounts to London just a week before the devastating depositor haircuts were unleashed upon his people. Of course, the denials are loud and Anastasiades has demanded an investigation into the claims; we are sure the government-selected 'independent' committee will be as thorough as the Libor anti-trust investigators.

The opposition parties in Germany are warning each other not to join Merkel. The general hope is if nobody joins in a coalition with here, she will be unable to form a government. There is a rising sentiment in Germany that if Southern Europe can’t pay their bills – no bailouts. This was the reason for taking the bold step to screw Cyprus following the M.F. Global solution agreed upon at G20. With our computer models targeting panics for the Fall, this German election is going to be do or die for the Euro – and that ain’t looking good. The only thing to look forward to are new lows – the major high is in place. The long-term models show Europe will crumble with a 23-26 year collapse from the 2007 high = probably 2032.

When the Euro was forming, some used the Ecu as the guide, we created the Euro back in time to provide a clearer picture. When we did, the high was different and that projected a low for 2000/2001 instead of 2002, with a rally thereafter into 2007. With the advantage of time, we can see that recreating the Euro was the proper configuration. The low was 2000 with the subsequent rally with 2007 forming the highest close, 2005 was the reaction low for the final rally into the major high. The next major low would be 2020/2021, but an initial low seems likely in 2017.

Argentina defaulted again in 2010. They are in dispute in the New York Court of Appeal, the most corrupt Federal Court in the nation, with what they call “vulture funds”. At a press conference defending their fight in a US court against creditors demanding to be paid $1.3 billion immediately, they are at least acknowledging that with every bailout or deal, they only owed more.

Governments MUST stop borrowing. Jefferson, was correct. There can be no government borrowing. Look at what is happening because these people do not know how to run a government. They borrow to bribe the people “vote for me and you will get this”. This is not Halloween. Do the job and stop the stupid promises you never keep. These people are morons. If they would ever read a history book they might learn something.

Thomas Jefferson got it. He wrote in 1789: “The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” John Adams said in 1799: “Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.” In 1820, Jefferson wrote: “It is incumbent on every generation to pay its own debts as it goes – a principle which, if acted on, would save one-half the wars of the world.” It was Karl Marx who praised a national debt in 1873. “The only part of the so-called national wealth that actually enters into the collectives possessions of modern peoples is their National Debt.” So who do we follow? Politicians who borrow are Marxists. We should call them that!

As Adam Smith wrote in Wealth of Nations:

“Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents and of repaying interest for the use of its own money.”

The fact that the German Finance Minister Wolfgang Schaeuble has come out stating that savings accounts within the Eurozone are “safe” claiming that Cyprus was a “special case” and not a template for future rescues, proves that in fact the Eurozone deposits areABSOLUTELYNOT SAFE! You never state a negative unless there is reason to do so. This is like Clinton – I did not have sexual relations with that girl announcement. In Japan, they assumed the Supreme Court ruled that oral sex is not really sex. I had to explain the Supreme Court made no such ruling.

The whole purpose of the Eurozone was a GUARANTEE that there would NEVER be any default. There was a default so just admit Europe had sexual relations with Cyprus and didn’t even leave a €1 tip. They selected Cyprus because (1) there were $4 billion in Russian deposits, and (2) it was attracting way too much money away from the main European economies that they were hunting down. Cyprus proved the G20 plan to confiscate deposits to pay off debt is alive and well. At least when Florence and Venice did forced loans compelling people to buy their bonds, they gave them something, then defaulted. Europe screwed Cyprus and gave nothing. Head to the stock market & real estate. This strategy was NOT to “stimulate” anything as the “spin doctors” are trying to claim. This is the next step in the Sovereign Debt Crisis before the wholesale defaults and the swap of currencies that is on the horizon. It was discussed at G20 levels because the USA had to write a $700 billion check to the NY bankers and they know they cannot do that again. So, the next time bankers lose your money trading their accounts, it will be the M.F. Global solution/Cyprus.

Even Adolf Hitler respected the sovereignty of Switzerland when he passed laws it was illegal for a German to have an account outside of Germany. Obama threatens to confiscate anyone who fails to report what Americans are doing and criminally prosecuted a Swiss bank for helping Americans. The Pope helped Jews escape Germany. Obama would arrest him today as a terrorist or conspiracy to money launder. The same is true of German and French politicians. Switzerland lost the ability to enforce its own laws and they treated the Vatican the same as Iran until they agreed to inform to whom every wire came from and was going to. Today, the world leaders make Hitler look like a respectful leader for they are far more ruthless, respect nobody but themselves, and diabolically untrustworthy. They will not respect the sovereignty of any nation when it comes to money. And Cyprus politicians showed whose side they are on – the political side AFRAID of German retaliation!!!!

This is World War III in the financial markets. World War II really began also in the financial markets with France shorting Austrian & German bonds and then turned on Britain until they all were forced off the gold standard (see Greatest Bull Market 1986).

Certain forward-thinking folks are reinventing farming as we know it. Indoor, organic urban farms growing food vertically using hydroponic and aquaponic principles, are sprouting around the country. The push for alternative methods of raising food follow in part, on the heels of local governments outlawing homeowners from growing vegetable gardens in their yards, and forcing people to tear out existing, healthy gardens.

I have always been a logical thinker. The teacher got very angry when I was in 4th grade and connected the dots concluding what she said was pure nonsense. Since she could not explain herself, the school called my father. He had to come down and plead with them not to expel me. So I founded Princeton Economics on the assumption nothing was ever known until we proved it was a LAW as in physics. I have never been a fan of personal opinion ever since 4th grade. Humans are fallible after all.

I tended to prefer the real sciences and regarded economics as merely suitable for a bunch of drunks to argue about nonsense at the local pub that ranked up there with the great debates of whether aliens populated the earth. In school I readJohn Kenneth Galbraith’s Great Crash and found it to be more political propaganda than fact. Nowhere in the book was there any mention about the 1931 Sovereign Debt Crisis.

Galbraith popularized the nonsense that stocks traded at 10 cents on the dollar. Very few stocks could be margined at that and the bulk were not even marginable at all. The stock brokers sold foreign government debt issued in small denominations directly to the public. Those bonds were listed on the NYSE and went the way of dinosaurs. You would think that might have been more important than stocks since it wiped out massive savings that led to a run on banks with over 3,000 failures. But what the hell. We can’t actually show how government screwed up. How could the academics advocate socialism?

Clearly, the academics were intent upon following Marx down that path to total government control where we now find ourselves, they filtered out anything that reflected the crisis was caused by government had to be hidden from public view. Kind-of how the Vietnamese never attacked us at Ton-kin Gulf when the truth came out any more than Iraq had weapons of mass destruction. North Korea DOES. So how come the US didn’t invade? Because they have them!

How could ALL the history books omit such a monumental fact? Talk about REALconspiracies – that’s one. It was truly criminal. Free Speech is not the freedom to omit anything you disagree with. If you hide the input to create a predetermined output, you get the destruction of society and total absurd nonsense. Unfortunately, this stuff still infects the talking heads on TV and myopic analysis that only looks at domestic issues.

In my opinion, those academics that have steered policies into the hand of government because they think society would be better off, are guilty as Marx, Stalin, and Mao. They have killed far more innocent souls and destroy the future of Western Society including your pension on a grand scale far beyond what any scientist who participated in creating the atomic bomb.

The economic policies of the 1930s have been so distorted it is sickening. The general consensus has been Marxist to the core advocating government is capable and should manipulate society. This has been a continuing source of myth and confusion. Many people believe that capitalism actually caused the Great Depression and that President Franklin Roosevelt helped to end it. Even theHistory Channel did a special on Roosevelt making the outrageous statement that his New Deal resulted in “recovery and reform”while creating “millions of jobs.” The WPA came in during 1935 and unemployment remained high until World War II began.

BTW, Roosevelt’s “ideas” were actually taken from and early march on Washington following the Panic of 1893. It was at that time proposed that the government should create PUBLIC WORKS to provide employment for those who were out of work. A leader came forward with this idea of creating PUBLIC WORKS to create employment which later became Roosevelt’s WPA (Workers Projects Administration) on April 8th, 1935. This leader was Jacob S. Coxley (1854-1951) who was an Ohio businessman that organized a march upon Washington that began on March 25th, 1894.

This was also a protest also againstAUSTERITY and served as the model for the book Wizard of Oz following the Yellow Brick Road – Gold Standard, that was imposing massive DEFLATION, and the Wizard was Congress. By the 1930s, it lost its political meaning and became a children’s movie in 1939. L. Frank Baum who wrote the book, was a participant in Coxley’s March.

Nevertheless, if you repeat a lie enough times, it obviously becomes fact. So trying to explain that the Great Depression was a worldwide event that began in Austria falls on deaf ears in the USA. Like drunk arguing absurd nonsense in a pub, far too often people argue it was speculation that led to the Great Depression. Even those constantly touting the stock market will fall again to 10 cents on the dollar are only focused on speculation and remain clueless as to the real cause of the event.

Then there are those who try to argue the other side claiming it was the misguidedDOMESTIC federal policies that caused the downturn, which began in 1929. They then assert the government prevented the economy from fully recovering for a decade because of Roosevelt. Others point to the austerity policies of the Federal Reserve exactly as we see in Germany and creating a shortage in money when that collapsed demand.

Congress, Hoover and Roosevelt all attacked the economy on many fronts. Hoover began the investigation of the stock market on a phone that there was a conspiracy to sink his administration. Hoover wrote in his memoirs (CHAPTER 11, pg 129):

“The reaction from these exposures, of course, paved the way for drastic legislation in the Roosevelt administration. That legislation has perhaps hampered honest business. But when representative government becomes angered, it will burn down the barn to get a rat out of it.”

Indeed, the SEC has constantly investigated, crowned the bankers with immunity so they are now known as the UNTOUCHABLES, and also seek more and more power with each crisis they failed to ever prevent. Their stories and excuses are endless.

One of the Greatest myths was about Roosevelt’s New Deal and his Brains Trust. Yes, he gathered academics who became known as the The Brains Trust, a term coined by reporter James Kieran of a New York Times. They were gathered to assist FDR during the 1932 presidential campaign but initially were three socialist professors from Columbia University – Raymond Moley, Rexford Guy Tugwell, and Adolph A. Berle, Jr. However, within a few months, Basil (“Doc”) O’Connor, Samuel I. Rosenman, and Hugh Johnson would join the group. These men would quickly help FDR develop an economic socialist plan regulating banks and stock activity on a grand scale. They also argued for the WPA public works programs for people living in both urban and rural areas.

Moley was a professor of government and law who recruited the group. However, he actually argued that a FLAT tax on all citizen’s pay, a sales tax, and a FLAT tax on the specific amount of any salary, was the ONLY way to rebuild the economy. Tugwell shaped much of the administration’s agricultural policy, believing that the key to easing some of the depression’s hardships lay in the ability of the federal government to address the growing imbalance between wages and prices in part caused by the rise in the dollar and collapse in commodity prices into 1932. However, Berle actually rejected the idea of any planned economy, but suggested a “new economic constitutional order” should include a larger federal role in the balancing of the economy.

During their first one hundred days in office, the Brains Trust helped Roosevelt enact fifteen major laws. One of the most important initiatives was the Banking Act of 1933, which put an end to the banking panic. After the Brains Trust defended its reform-recovery program in 1933, it disbanded to make room for other advisers and lawyers capable of legislative draftsmanship. However, they actually argued against the devaluation of the dollar against gold. It was George Warren who really reversed the economy.

Myth and fact never seem to meet regardless of the period of time. Roosevelt’s Brain Trust never advocated the socialistic system we have today nor did they advocate perpetually borrowing. These events grew without direction and more and more academics began to believe their own bullshit calling this the age of New Economics where they would eliminate the business cycle forever. Of course, Paul Volcker in his Rediscovery of the Business Cycle has shown that this nonsense has proven to be complete false.

The 1930s were an era of aggressive governmental activist policies that hurt, rather than helped the economy. Roosevelt did not listen to his famous Brain Trust because they were insane only concerned about supporting bondholders as is the case in Germany right now. Government interventions reduced the flexibility that markets needed to adjust to shocks and return to growth just as Japan succeeded in creating a 23 years economic depression by trying to support the economy.

The real gross domestic product fell sharply and protectionism rose because politicians did not understand currency flows or values. Real economic output only regained its 1929 level in 1936 after the devaluation of the dollar, but that is in nominal terms, which was followed by a swan dive into 1938.

Others are confused by the post-World War I recovery that was rapid following thesharp contraction into 1921 where real output fell 9 percent in 1921 with unemployment rising to nearly 12%. They see the quick rebound and then compare that to Roosevelt to discredit his policies. All of this on both sides is justWRONG. It is the result of domestic myopic vision where nobody looks at anything outside of the domestic economy. Whatever happens there, must have been caused by someone in Brooklyn or someplace.

Until we begin an UNBIASED global perspective in our analysis, we are still barking up the wrong tree and will NEVER see a solution. This is also why most analysts who just try to forecast a single market ultimately fail. They cannot see the world around them

David Miliband in England announced he was stepping down after losing the Labour leadership to his brother no less. However, his written victory speech that was never delivered has gained interest. He wrote:

“Step one is to recognise what is obvious: that we did not abolish the business cycle. We should never have claimed it. You can’t in a market economy. And public spending plans cannot depend on it. Nor can you write your own fiscal rules and then be the judge and jury for how they are calculated and when they are met.”

Of course they are just words of a politician. It would be nice just for once if the light really parted through the clouds and sanity could rule instead of manipulation.